WeWork's IPO registration tries to justify the huge technological valuation

WeWork, officially known as We Company, released papers to go public Wednesday. In it, the collaborative company tried hard to defend its huge $ 47 billion valuation, which is more than it would be worth if it was considered a real estate company as its main competitor IWG. What makes WeWork worth more, the company seems to say, is that it is a technical company – which means that innovation and flexibility make it better than a regular real estate company.

It's a tough argument to give, given that for a long time, IWG has had significantly more square footage and more customers, and has actually made profits ̵[ads1]1; yet the market price is only 8 percent of what SoftBank's latest round of funding thinks WeWork is worth.

WeWork submission shows that some great progress has been made as far as its relative size to IWG, but it still does not explain a valuation that is more than ten times higher. WeWork is operating at a huge loss and lost almost $ 900 million during the first half of 2019, but it also doubled revenue compared to the previous year.

Today's release laid on the argument that it is a technical company – and by extension deserves its high price tag – very heavy. WeWork used a version of the word “tech” 123 times in public filing; That's more than the video calling software company Zoom did in its IPO filing in 2019, but less than the ride-hailing app Uber did, which also had to contend with arguments that it is basically a taxi company.

The foundation of our global platform, WeWork's S-1 filing sounds. "Our custom-built technology and operational expertise have enabled us to scale our core business as a WeWork room-as-a-service quickly, while improving the quality of our solutions and reducing the cost of finding, building, filling and operating our room."

It emphasizes that it employs many technicians: a total of 1,000 engineers, product designers and machine learning researchers of the company's approximately 12,500 direct employees. However, one could argue that most companies are "technology companies" these days, with most companies hiring many engineers to facilitate business – and financial – movement online. IWG said it had no relationship between technical and other employees available.

Note that WeWork is also securing at this point, and is also trying to promote its human side. It says it has 2,500 community leaders "who promote human connection through collaboration and uniquely support our members both personally and professionally," but adds that "the entire member experience is driven by technology designed to enable our members to manage their own space, make connections between one another and access products and services, all with the goal of increasing our members' productivity, happiness and success. "

It is both human and machine.

Thanks to a tech company, WeWork continues, "[We] is able to deliver a first-rate experience to our members at a lower cost compared to traditional alternatives."

This is probably the most prominent part of the argument WeWork says cost per employee is nearly 60 percent lower than competitors thanks to the efficiency of technology, which means it can outperform its rivals on a cost-saving basis.

But right now, the company is losing money to fist ( not an unusual practice among unicorns, but not exactly an approval of WeWork's penny-pinching. ”It has also been plagued by allegations of gender and age discrimination as well as self-handling. The company, which had avoided the expense – and risk – of Leasing rather than buying real estate was actually leasing property from WeWork CEO Adam Neumann and earning him millions. ng bought the buildings to avoid conflicts. Neumann recently paid more than $ 700 million from the company in a mix of stock sales and debt – not a great look for a founder trying to demonstrate to others why they should buy the stock.

And "space as a service" does not make a software company stock.

Despite the founder's extensive investments, WeWork has only two lines of income: the dominant "membership and revenue service" – basically what members pay for renting office space as well as all the extras, like booking a conference room – and "other revenue, "which consists of sponsorship and ticket sales from WeWork-branded events.

And while WeWork & # 39; s technology integration is certainly valuable to customers (and to optimize how it operates its business), the main product is office space. And it is not a technical product.

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